Copper, Crude Oil, and Gold Rally as Global Uncertainty Fuels Investor Moves
Monday's commodity markets experienced significant movements across copper, crude oil, and gold, influenced by a range of geopolitical and economic factors. Copper contracts on the London Metal Exchange (LME), crude oil futures on NYMEX, and gold futures on COMEX all saw gains as disruptions in mining, escalating geopolitical tensions, and economic signals shaped investor sentiment.
Copper contracts on the LME rose on Monday amid mining disruptions in Australia. Melbourne-based BHP's Olympic Dam temporarily halted copper mining and processing due to power outages caused by thunderstorms. While the duration of the pause remains unclear, analysts do not anticipate a significant impact on copper prices. A 15-day halt would result in around 8,000 tonnes of lost copper output, which analysts consider negligible given BHP's expected global output of up to 2 million tonnes for fiscal 2025 and the approximately 26-million-tonne world copper market.
In addition to mining disruptions, a weaker U.S. dollar also bolstered copper prices. A weaker dollar generally enhances the appeal of dollar-denominated metals like copper, as they become more affordable for holders of other currencies. Positive economic indicators from China, the world's largest consumer of copper, provided further support. The National Bureau of Statistics reported that China's GDP grew by 4.6% in the third quarter of 2024, slightly exceeding the 4.5% growth expected by economists. At 07:31 IST, the three-month copper contract on the LME was quoted at $9,691.50 per tonne, up 0.7% from the previous close.
Crude oil futures on NYMEX also rose in early Asian trade on Monday, driven by escalating geopolitical tensions in West Asia. Over the weekend, Israeli strikes targeted Beirut's southern suburbs, including branches of Al-Qard al-Hasan, a financial association linked to Hezbollah. This escalation heightened the perceived risk of oil supply disruptions, prompting short-covering in the market. TD Securities commodity strategists noted that the increased tension in West Asia has amplified the threat of potential disruptions in oil supply.
Further supporting oil prices, the People's Bank of China cut key lending rates on Monday, lowering the one-year and five-year loan prime rates by 25 basis points to 3.10% and 3.60%, respectively. Lower borrowing costs are expected to spur economic growth, thereby boosting oil demand. At 07:55 IST, the most-active December crude oil contract on NYMEX was quoted at $68.83 per barrel, up 0.22% from the previous close.
Gold futures on COMEX rose in early Asian trade on Monday, driven by escalating geopolitical tensions in West Asia, which increased the precious metal's safe-haven appeal. The death of Hamas leader Yahya Sinwar has added further uncertainty to ongoing negotiations and conflicts, bolstering the demand for gold. Samer Hasn, a senior market analyst at XS.com, commented that the elimination of Sinwar adds further complexity to the situation in West Asia.
Israeli strikes also targeted Hezbollah-linked branches in Beirut's southern suburbs on Sunday, contributing to the rising geopolitical risks. Rear Admiral Daniel Hagari, spokesperson for the Israel Defence Forces, stated that Sinwar's elimination was the result of a year-long intelligence operation and that their mission is "not over." The rising tensions in the region have supported increased demand for safe-haven assets such as gold.
